All Forum Posts by: Timothy Lewis

@Alipate Moleni Awesome. Nothing wrong would good options to choose from!

@Brian Kreitz I wish I had enough equity in my home to make a HELOC worth it to invest in my market. I like the appeal of it being available to use repeatedly over time. Since it seems you have doubts, consider a lower LTV as @Odie Ayaga suggests and make sure you have enough reserves to cover the payments should you run into trouble.

If you're doing a buy and hold, I'm with Rumen. If you're flipping, run the numbers with a bit of cushion in your hold period and you may get the opposite result.@Rumen Mladenov

@Miguel Sanson There are many posts weighing the pros and cons on having a license. However, it is definitely not a requirement. You can benefit from saving on agent commissions and have direct access to the MLS, but a great agent is worth every cent.

If you think you want the be agent agent go ahead, otherwise, the carrying costs and required disclosures to sellers may reduce the benefits.

@Jared Shoemaker congrats on doing your first deal! What kind of rents are you getting/expecting now that you've renovated/updated the units? Also, what was your thinking behind using a 15 year, 5 ARM? Just curious.

@Alipate Moleni are there any draw fees associated with using the HELOC? That should also factor into your analysis as well as the minimum permitted draw amount. Between the two, it really depends on how much volume you plan to do over the course of your HELOC and what hold periods you'll have before refinancing them.

Assuming you use only usually $100K on each loan, and on average have you funds drawn for 6 months until you refinance, you would pay about $250 more in interest using the prime+1.5% loan. However, you'd have to BRRRR 8 homes before you reach the closing costs you pay on day one with the prime+.94% loan. Though I'm predisposed to lower rates, I lean away from paying upfront costs. In this case variable prime+1.5% looks better unless you expect to do many more homes and your average hold period is longer. Plus you have another $15k to work with!

Any draw or other fees you haven't mentioned could change the outlook. Good luck.

@Robert Lipscomb it sounds like a potentially awesome opportunity. Spencer makes a good point about compensation, so I'll bring up a different angle. You say you're going to take over all the debt. Are you doing this personally or does the debt belong to an LLC that controls the property and you just have the responsibility of ensuring it gets repaid? Be clear on what you're signing up for here.

Definitely, re-emphasizing Spencer's point that you should split the cash flow after paying the debt. Consider calculating your Debt Service Coverage Ratio using your 80% NOI number. Is it higher than 1.25x? If so, you may be able to make the numbers work under your proposed agreement. You may just need to show it differently (e.g., depending on debt payments 20% NOI could be 50% CFADS). Be clear on this ratio for your on understanding.

Also, make sure you have a good handle on CAPEX requirements between now and your expected refinance.

@Kyle W. sounds like a very interesting prospect. I'm not a tax lien expert, but your order of seniority (RE taxes trump mortgage) seems correct. The case you describe does appear to be a way to take down the property, but you may want to get insight on the status of the title. In a case like this, if there is a mortgage, bet your firstborn the lender will bid to get the tax lien (potentially up to the market value or the mortgage amount) to secure first lien position. In the case you win the bid, you'd have to check on AZ's rules about the right of redemption to determine the time until foreclosure is permitted. You'd also want to learn more about the asset you'd foreclose on, if it has significant delayed CAPEX and is struggling financially and you don't have the capital or know-how to fix it, you could be inheriting more headache than wealth. Then again, if it was easy, maybe there wouldn't be a potential arbitrage opportunity. Hope this helps.

@Ryan Harris Have you thought about using the BP calculator? If that doesn't  do it for you, it should be fairly simple to google the calculations and put them in a spreadsheet you put together.

@Justin Onyeador Also keep in mind that self storage is typically more operator-intensive. Consider the age of the facility and how occupied it has been. Are you buying something with potential to improve performance or something stabilized? BP Podcast Episode 138 has some good info about self-storage. https://www.biggerpockets.com/blog/2015-09-03-bp-podcast-138storagesystemsseo-michael-rogers